Activist Buyer Sparks Safeway ‘Poison Pill’

PLEASANTON, Calif. — The investor that sparked Safeway’s adoption of a “poison pill” takeover defense Tuesday is Jana Partners, a New York-based activist investor.

Jana, known for influencing the boards of companies like Marathon Petroleum and McGraw Hill, said in federal documents Tuesday that it acquired nearly 15 million shares of Safeway for a 6.2% ownership stake, and that it intends to use the stake to engage with management in discussion of strategic alternatives, potential market exits and other matters.

Earlier Tuesday, Safeway adopted a so-called “poison pill” that would trigger when an investor acquires more than a 10% of its common stock. That plan, Safeway said, would allow the company to continue implementing its strategic plan.

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Jana said Tuesday that it “has had and may continue to have discussions with [Safeway] management regarding a review of strategic alternatives including reviewing the markets in which the issuer operates and exiting subscale and lower margin geographies, the issuer’s capital structure including providing for a significant return of capital to shareholders, the issuer’s corporate structure including the transferring of its stake in Blackhawk Network Holdings to shareholders, and the issuer’s investor communications including increasing transparency.”

Jana “may also seek to discuss other topics including management and board composition, strategy and future plans,” and “may take other steps seeking to bring about changes to increase shareholder value as well as pursue other plans or proposals.”

Read more: Safeway Mum on Further Divestitures

Jana describes itself as “a value-oriented investment advisor specializing in event-driven investing.” According to reports, it successfully lobbied the management of Marathon Petroleum and McGraw Hill to restructure parts of their respective businesses.

Safeway’s stock was up Tuesday by nearly 10% to a new 52-week high following the news of Safeway’s poison pill. Under the plan, Safeway will distribute one right to purchase preferred stock for every share of common stock owned as of Sept. 30.

“The board believes that the rights plan will help ensure that the company can continue to implement its strategic plan and maximize the long-term value of the company for all shareholders,” Safeway said. “The rights plan, which was adopted following evaluation and consultation with the company's outside advisors, is similar to plans adopted by numerous publicly traded companies.”